A fourth video-game manufacturer said Monday it being investigated by the Securities and Exchange Commission regarding a common gaming industry accounting practice that may give firms too much leeway to smooth over earnings fluctuations.

Midway Games of Chicago said it, too, has become a target in the widening SEC probe first revealed Friday when three vendors -- THQ Inc. of Calabasas Hills (Los Angeles County), Activision of Santa Monica and Acclaim Entertainment of Glen Cove, N.Y. -- said their revenue recognition practices had come under investigation.

Shares of all four firms closed lower Monday as nervousness over the SEC action, coupled with a 1.6 percent dip on the Nasdaq, depressed most game- industry stocks.

Electronic Arts, the gaming giant based in Redwood City, bucked the down trend, however, and closed 42 cents higher at $76.84, a half-percent gain, as the market interpreted the company's silence as a tacit suggestion that it has not been drawn into the probe.

But analyst Michael Pachter with Wedbush Morgan Securities in Los Angeles, who issued a July 1 financial report that raised questions about game industry accounting practices, said EA and New York City's Take-Two Interactive Software probably will be drawn into the inquiry.

"Electronic Arts and Take-Two are part of it, they must be," said Pachter, who said the SEC is investigating the entire industry and will have to look at all its major players.

An EA spokesman said the firm is in a quiet period leading up to a scheduled earnings report on Wednesday, and would have nothing direct to say about the SEC matter. The spokesman did point out that EA had recently gone through an SEC review as part of an unrelated plan to raise capital and had no outstanding accounting issues.

Take-Two could not be reached. Last year the New York firm restated seven quarters of financial results, and the SEC is already investigating its accounting practices.

An SEC spokesman, following agency custom, declined to comment on any of these matters.

Pachter, the Wedbush Morgan analyst, said he thinks the latest SEC query will focus on the size of the reserves that game industry vendors build into their earnings to account for price cuts and returned inventory.

As Pachter explained, discounting is standard in the industry. Vendors who ship games to retailers or distributors at a high introductory price can be certain that some of that high-priced inventory will still be in the sales channel when price cuts are announced.

When price cuts occur, retailers demand rebates on unsold inventory, he said. The reserve accounts are subtracted from the original revenue in recognition of the likelihood that some part of that money will be rebated to retailers, Pachter said.

Pachter said the SEC is probably interested in whether companies may be using these reserves not simply to account for retailer rebates, but to smooth over earnings from quarter to quarter. For instance, if a company booked an unnecessarily large reserve during a strong sales quarter, it might be able to trim that reserve during a weak quarter to meet earnings expectations, Pachter said.

"I don't think they've done anything wrong," said Pachter, who says the SEC will simply tell game vendors what percent of revenue they should hold back in these reserve accounts.